by: Sarah Joson
Monday, October 19, 2015 | Outsourcing News |
The third quarter ISG Outsourcing Index report revealed that major sourcing markets are moving towards shorter and more affordable contracts which resulted to an increase in contract volume, but a flat overall value globally.
The report covers commercial outsourcing contracts with an annual contract value (ACV) of $5 million or more. A total of 344 contracts were closed in the third quarter, which is a 20 percent increase from the same period last year. However, it is lower than the 448 contracts signed in the second quarter of 2015. Third quarter ACV for this year amounted to $5.6 billion. It is similar with the previous year’s ACV, but is nine percent lower than this year’s second quarter.
Five mega-relationships (contracts valued at more than $100 million annually) were posted, rounding it up the year-to-date total to 14, the lowest figure in the three quarters for the past 10 years.
Meanwhile, for the first three quarters, the volume and ACV for deals valued less than $40 million both reached record highs. In fact, the total volume of contracts climbed eight percent with 1,094 - the highest ever from the same period in 2014 despite an 11 percent decrease in ACV to $16.8 billion.
Value of new-scope contracts reached $3.8 billion which is eight percent higher than last year. Restructured contracts fell 13 percent for the quarter to $1.8 billion. An 11 percent drop was seen for both new-scope and restructured-contract ACV due to a slowing manufacturing sector and unimpressive activity in the financial services sector.
Per segment, business process outsourcing (BPO) took the center stage with its ACV growing 53 percent to $2.0 billion, mostly because of the increase in call center outsourcing and industry-centric operations. In some segments such as information technology outsourcing (ITO), the volume of contracts declined by 15 percent as cloud integration continues to saturate the market.